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Can Your Business Credit Survive a Bad Storm?

  Anyone that has lived through a hurricane can relate to the hardship many people face during the arrival of the storm and the months thereafter trying to restore normalcy. Everybody’s situation is different in regards to a financial burden. Financial hardship after a lingering storm is an issue many people overlook and is rarely mentioned in the news. Some people will lose wages, jobs, homes, property, and businesses. If they are lucky to have insurance, there is a waiting time, deductibles to pay and many additional losses not covered.

Many small business owners are affected financially in different ways.

1. Cash flow shortages

Checks from customers are lost in the mail due to flooding or slow down for a week or two until the mail services catches up. This is crucial for a small business with limited capital.

Local customers are in the same situation so they can’t pay vendors/suppliers.

The business was unable to generate revenue due to the storm, therefore causing a gap in revenue/profit for that week(s) of the storm.

Damaged inventory causing a delay in sales to get back up and running.

Unsold inventory that should have sold during the storm is now due for payment to vendors.

2. Secondary causes

Shipments from overseas/domestic are held up at the shipping port causing delays in the supply chain. Shortage of inventory is as bad as not open for business.

Canceled orders from customers due to the local situation.

Damaged roads near the business causing walk in business to diminish for months.

Direct damage to computers, digital software losses and data. It is recommended to use a service like Dropbox or a cloud server for quick recovery of files.

Regardless if a company sells business to business, or business to consumers, there will be some type of financial burden after the storm.

Many companies that get hit with a sudden cash flow shortage due to a storm, slow sales or sales on credit terms usually go to the bank. However, the bank is not the best solution due to the current situation the business is in. Unless the business has excessive collateral, the loan will be unlikely approved, or approval can take months.

One quick solution that can help a business with cash flow shortages due to sales on credit terms is a factoring company. Invoice factoring is a financial tool many business owners use to help with the cash-flow shortage caused by selling on credit terms. The approval is within three working days and funding takes place within 24 hours based on performing receivables. A line of credit is established based on the value of the receivables within days, and not months.

Every business owner should have a financial backup plan for a stormy situation. What is yours?